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EXHIBIT 10.3
[FREMONT GOLD CORPORATION LETTERHEAD]
December 12, 1996
RTZ Mining & Exploration Limited
Cruz del Sur 133, Piso 4
Las Condes
Santiago
Chile
ATTENTION: Mr. Thomas C. Patton, Managing Director
Dear Mr. Patton,
Cenizas Property, Region II, Chile
Fremont Gold Corporation ("Fremont") makes the following offer to RTZ Mining &
Exploration Limited ("RTZ") for the Cenizas Property (as described in the
attached Schedule "A"), located in Region II, Chile. All dollar amounts referred
to are U.S. dollars.
1. Fremont will acquire an initial 51% interest in the project over a
maximum of a three year period by making a cash payments totaling $350,000,
grant certain options of Fremont stock to RTZ and commit to expend $1 million in
exploration costs on the Cenizas Property. The schedule would be as follows:
WORK
TIME CASH PAYMENTS STOCK OPTIONS COMMITMENTS
- ---- ------------- ------------- -----------
On Signing $25,000 --- $200,000 1st year
6 months $25,000 150,000 @ $1.50 ---
One Year $50,000 150,000 @ $2.00 $300,000 2nd year
Two Years $100,000 $500,000 3rd year
Three Years $150,000
Totals $350,000 $1,000,000
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2. By the end of this three year period (or sooner if Fremont chooses
to advance the schedule), Fremont would have earned a 51% interest and the
Cenizas project will become a joint venture between Fremont and RTZ, with RTZ's
interest being 49%. All further expenditures on the project will be split 51/49%
and Fremont would manage the joint venture and each part will be deemed to have
contributed its portion of the total$3.0 million.
3. If RTZ chooses not to participate in future exploration or
development costs then a dilution formula would apply. This would calculate each
parties interest in the property by using the ratios between each parties deemed
contributions to the property to the total expenditures on the property i.e.
property interest would be Fremont 80%, RTZ 20% after Fremont spends a total of
$6.0 million on the property and RTZ opts not to contribute beyond the initial
deemed expenditure.
4. Within 60 days of Fremont acquiring 51% interest in the Cenizas
Property, RTZ will have the option to regain operatorship of the project and
acquire an additional 2% interest (RTZ 51%, Fremont 49%) by committing to fund
the Cenizas project through a bankable feasibility study to be completed within
a 30 month period.
5. In the event RTZ regains operatorship of the Cenizas property, and
for the purposes of calculating any possible dilution of either parties
interests, at completion of the feasibility study RTZ's deemed expenditure will
be 51$ of the total expenditure on the property and Fremont's deemed expenditure
will be 49% of the total expenditure on the property.
6. Following completion of the feasibility study, RTZ and Fremont will
jointly consider the results and shall advise each other whether it wishes to
proceed to development.
(a) If both parties wish to proceed to development and if RTZ
chooses to become operator of the project, then at Fremont's request,
RTZ will use all reasonable endeavors, within a two-year period from
completion of the feasibility study, to arrange the project finance,
which shall be on customary terms and at an interest rate not exceeding
2 percent over US$LIBOR. The term "arrange"does not imply and
disproportionate financial burden, actual or contingent, on RTZ, and
neither RTZ nor any of its affiliates shall be under any obligation to
provide guarantees or credit enhancement of any kind on Fremont's
behalf. If RTZ is not able to arrange project financing within the
two-
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year period, then Fremont would become the operator and majority owner
of the Cenizas property (Fremont 51%, RTZ 49%) and the project will
proceed to development with contributions pro-rata and dilution in
effect.
(b) If only one party wishes to proceed to development, the
other party may transfer its pro-rata interest in consideration for the
fair market value of that interest, as determined by the feasibility
study. If for any reason this interest is not transferred, the other
party will retain its pro-rata interest, subject to dilution.
(c) If neither party wishes to proceed, the manager shall
place the project on care and maintenance at minimum cost until such
time as one or both parties develop the project or jointly dispose of
the assets. In this event, pro-rata interests shall remain as they were
at completion of the feasibility study.
7. The party that arranges he production financing will charge a fee to
the other party equivalent to 0.5% of the capital raised.
8. If either party's interest becomes less than 20% then the majority
party would have the option to convert the minority party's interest to a 2% NSR
capped at $3.0 million.
9. Either party has the right to sell its interest in the Cenizas
property, subject to reciprocal rights of first refusal.
10. A full legal agreement to be completed prior to completion of first
year's work commitment.
11. We understand that RTZ holds the property, (as described in the
attached Schedule "A") one hundred percent (100%) free and clear of liens and
encumbrances, including royalties.
12. The actual structure of this transaction will be settled on the
basis of tax efficiency and good business practice in Chile. It may take a
corporate, as opposed to a joint venture form.
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If the above meets your understanding, please sign below and return one copy to
this office.
AGREED on this 12th day of December, 1996.
FREMONT GOLD CORPORATION
/s/ Michael J. Hopley
- ----------------------------------
Michael J. Hopley, President & CEO
AGREED on this 13th day of December, 1996
/s/ Thomas C. Patton
- -----------------------------------
Thomas C. Patton, Managing Director
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SCHEDULE "A"
CENIZAS PROPERTY, REGION II, CHILE
CLAIM NAME HECTARES STATUS
---------- -------- ------
Llano 1 1/80 100 Constituted
Llano 2A 1/60 400 Constituted
Llano 2B 1/60 400 Constituted
Llano 3A 1/60 600 Constituted
Llano 3B 1/60 600 Constituted
Llano 4 1/80 398 Constituted
Llano 6 1/75 120 Constituted
Llano 7 1/75 150 Constituted
Llano 12B 1/90 900 Constituted
Llano 13A 1/60 600 Constituted
Llano 13B 1/90 900 Constituted
Llano F 1 In Progress
Llano 16 1/20 200 In Progress
Llano 17 1/30 300 In Progress
Llano 18 1/300 90 In Progress
TOTAL HECTARES 6759
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[MAP/SCHEDULE "A"]